The much disputed American recovery plan named Inflation reduction act by Joe Biden, to have a “ limited effectiveness “, According to a note from Cepii, a government think tank, published on Tuesday, February 21. Information that clashes with the concerns of the leaders of the Old Continent who have been warning for several months about the risks of industrial relocations linked to the Inflation Reduction Act (IRA), a major plan which generously subsidizes strategic sectors (batteries, solar panels) to as much as they locate their production in the United States.
This recovery plan from across the Atlantic dedicated to the fight against inflation, the greening of economic activities and American growth provides in particular that subsidies for the purchase of an electric vehicle, which can go up to 7,500 dollars, be granted only to American vehicles, thus giving a boost to local manufacturers at the expense of European companies excluded from aid.
But according to the Center for Prospective Studies and International Information: the location of a production activity depends on many factors and the European Union has advantages in terms of attracting foreign direct investment (market size, quality of institutions, human capital, etc.).
Criteria that are too restrictive
The Cepii advances another argument to qualify the impact of the IRA: if, on the one hand, the law (American) gives attractive tax incentives, on the other hand, the associated technical criteria for meeting local content obligations are restrictive. In other words, the companies that could benefit from these subsidies are limited. A US Treasury study also established in August 2022 that barely one in five electric cars was eligible for the $7,500 tax credit provided by the IRA for purchasers of these vehicles. ” As the law provides for an increase in local content threshold percentages, it will be increasingly difficult for entrepreneurs to meet these criteria. “, anticipates the Cepii.
Not to mention that the IRA prohibits the use of components from China, Iran, Russia or North Korea, key suppliers for certain strategic metals such as lithium or cobalt.
The France 2030 plan proportionally as powerful
But we must also take into account, according to Cepii, that the 391 billion dollars earmarked by the United States for green industries represent only 0.17% of the American gross domestic product.
« France does proportionally as much as the IRA in terms of subsidies with the France 2030 plan, which is equivalent to 2% of French GDP over ten years », i.e. 0.2% each year on average. Moreover, ” IRA spending is less than half that of the EU in the same field, evaluated by Cepii at 0.5% of European GDP. ” Substantial funding for European industries already exists “, concludes Cepii in its note, which calls for improving the European framework for state aid and making subsidies “ more accessible and predictable ».
EU seeks response to IRA
This analysis puts into perspective the statements and actions of European leaders to respond to the threat from the West. On Wednesday February 1, Ursula von der Leyen, the President of the European Commission, indeed proposed to simplify the granting of permits to build factories, the extraction and conditioning of critical metals on European soil and above all the aid for government to green industries (which therefore already exist in Europe), including through tax incentives.
But faced with these announcements, the European Trade Union Confederation (ETUC) for its part criticized the EU’s plans to respond to the IRA and asked Brussels to include social and environmental clauses in their future support plan. If the subsidies envisaged are not conditional on compliance with social and environmental standards, warned the ETUC on February 9, “ 250 billion euros in EU funds and billions in national public aid could be given to companies that are pulling down » ces standards. « Increasing public investment in green industry is the right thing to do, but leaders (politics, Editor’s note) have a responsibility to ensure that public money is used for the common good “, thus affirmed Esther Lynch, the general secretary of the ETUC.
(With AFP)
